Merits of functional organization:

1. Benefit of Specialization

This system provides ample opportunities for minute specialization to its maximum extent.

2. Expertise Knowledge

This system can be entrusted with higher efficiency as knowledge of the experts in the field are involved extensively used. Workers are assisted by experts’ instructions.

3. Division of Work

The whole work process is segregated into functions, and the specialists in the field take care of it. Hence, there is no work burden to executives. The executives perform only a few functions. Mental and manual labors are also separated and so both jobs can be performed with higher degree of efficiency in an organization.

4. Scope for Training

This system also provides opportunity for appropriate training to inspectors and supervisors. This aspect automatically brings flexibility into the organization.

5. Scope for Expansion

Expansion of the enterprise without any dislocation or loss of efficiency is possible.

6. Mass Production

Since specialization is the back bone of the system, the large scale production can be undertaken with minimum costs.

Demerits of Functional Organization:

The functional system is not an unmixed blessing. This system, of course, works very well under a dynamic leadership. Without such leadership qualities it is impossible to attain the same degree of success, due to the following disadvantages:

1. Absence of Unity of Command

The workers have to obey the instructions of many foremen. No individual can work best under two masters. Then how can one serve under many masters. Hence, there is no unity of command and the resultants are conflicts and chaos.

2. Lack of Co-ordination

Without unity of command, co-ordination can not be achieved to the peak level. This system has the effect of destroying co-ordination in the organization, particularly at lower levels..

3. Difficulty in Fixing Responsibility

Since there is no unity of command, fixing of responsibility is a practical impossibility. Thus, this system upsets the very basis of organization which aims at fixing of responsibility.

4. Chances for Indiscipline

Maintaining of discipline is a difficult task because each worker is subject to work under eight bosses. Indiscipline at all levels has the effect of lowering the employees morale.

5. High Clerical Costs

This system also increases the amount of clerical work which ultimately results in the increase in the amount of overhead expenses. Hence, it is uneconomical.

6. Absence of Initiative

Workers, being always spoon fed with technical knowledge, shall lose initiative and become a group of mere automation. The supervisors shall also lose their drive and initiative. Hence, even the routine work shall become complicated.